The Thesis

Lower expectations and pricing power heading into 2019 have created significant upside for most U.S. airline stocks.

“In addition, there are key structural differences in the industry vs. previous low-fuel environments, most notably the 2015-2016 periods, which we expect to result in unit revenue growth in the U.S. this time around,” Derchin wrote in the note.

Derchin said Delta and United are two exceptions to the general optimism due to their exposure to a weak China market, tough year-over-year comps and the potential for further multiple compression in the stocks. Derchin said investors should stick to stocks with mostly domestic exposure and those with the lowest market expectations.